February(2014(

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•   !Taxes!levied!on!imports!of!goods:!Import!Tax!(II),!IPI,!PIS,!COFINS,!ICMS!and!
AFRMM!
•   !II!and!IPI!rates!vary!according!to!classiCication!code!(NCM)!of!the!good!
•   !PIS!and!COFINS:!1,65%!and!7,6%!
•   !ICMS!rate!varies!according!to!the!State!where!the!importer!is!located!(in!RJ:!
16%)!

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•   ! AFRMM:! 25%! (over! freight! cost! related! to! cargo! discharged! in! Brazilian!
ports)!
•   ! The! calculation! basis! of! each! of! these! taxes! is! different! (some! of! them! are!
included!in!the!basis!of!the!others)!
•   ! IPI,! PIS,! COFINS! and! ICMS! are! nonQcumulative! and! generally! follow! a! VAT!
mechanics! (amounts! paid! on! imports! can! generally! be! deducted! from! the!
amounts!levied!on!subsequent!transactions)!!

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•   !Taxes!levied!on!imports!of!services:!PIS,!COFINS,!ISS,!IRRF,!CIDE!and!IOF.!!
•   !PIS!and!COFINS:!1,65%!and!7,6%!
•   !ISS:!2%!to!5%!(the!rate!varies!according!to!the!scope!of!the!service!and!to!
the!municipality!where!the!service!is!rendered)!
•   ! IRRF:! 15%! (or! 25%! if! the! service! provider! is! located! in! a! tax! haven!
jurisdiction)!
•   !CIDE:!10%!(in!case!of!technical!assistance!or!services!that!involve!transfer!
of!technology,!as!deCined!by!applicable!legislation)!
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•   !IOF:!!0,38%!

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•   !As!a!general!rule,!IPI,!PIS,!COFINS!and!ICMS!are!levied!on!local!sales!
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!IPI!rate!varies!according!to!the!classiCication!code!(NCM)!of!the!good!
!
! PIS! and! COFINS:! 1,65%! and! 7,6%! (with! credits)! or! 0,65%! and! 3%!
(without! credits)! over! the! gross! revenues,! depending! on! the! taxation!
regime!(“Lucro!Real”!or!“Lucro!Presumido”)!adopted!by!the!seller!
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!ICMS!rate!varies!according!to!(i)!the!classiCication!code!(NCM)!of!the!
good,!(ii)!the!State!where!the!seller!is!located!and!(iii)!the!State!where!
the!buyer!is!located!
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! IPI,! PIS,! COFINS! (under! Lucro! Real! regime)! and! ICMS! are! nonQ cumulative!
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•   !The!following!taxes!are!levied!on!local!services:!PIS,!COFINS!and!ISS!
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PIS!and!COFINS:!same!rules!applicable!for!the!goods!
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!ISS:!2%!to!5%.!The!rate!varies!according!to!the!scope!of!the!service!
and!to!the!municipality!where!the!service!is!rendered!!

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•   ! ProCits,! income! and! capital! gains! earned! worldwide! by! Brazilian! tax!
residents!are!subject!to!Brazilian!corporate!income!taxes:!
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!Brazilian!corporate!income!tax!(IRPJ):!25%!on!the!net!taxable!income!
(it!is!applied!at!a!basic!rate!of!15%,!plus!a!surtax!of!10%!on!the!annual!
income!that!exceeds!R$!240,000.00!per!year!or!R$!20,000.00!per!month).!!
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!Social!contribution!on!net!proCits!(CSLL):!9%!also!over!the!net!taxable!
income.!
•   ! Dividend! distributions! from! Brazilian! companies! are! currently! tax!
exempted.!Capital!gains!earned!by!non!residents!on!the!sale!of!investments!in!
Brazil!are!subject!to!withholding!income!tax!at!a!general!15%!rate!(25%!rate!
if!the!gain!is!registered!by!a!company!located!in!a!tax!haven!jurisdiction).!!!
•   !Remittance!of!interests!and!royalties!to!non!residents,!as!a!general!rule,!are!
also!subject!to!withholding!income!tax!at!a!general!15%!rate!(25%!rate!if!the!
beneCiciary!is!a!company!located!in!a!tax!haven!jurisdiction).
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•   !!Temporary!Admission:!
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!Suspension!of!taxes!on!imports!of!machines,!equipment!etc.!that!are!
qualiCied! for! the! REPETRO! regime,! owned! by! a! foreign! Company! and!
rented/leased/chartered! to! a! Brazilian! Company! to! be! used! in! O&G!
exploration!or!production!activities.!
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!The!taxes!are!suspended!according!to!the!term!of!the!rental/leasing/
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charter!agreement.!!
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!ICMS!aspects!vary!from!each!State.!
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•   !Deemed!exportation!without!the!necessity!for!the!equipment!to!leave!the!
country:!!
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!If!an!equipment!is!manufactured!in!Brazil!to!be!used!in!O&G!activities,!
it!may!be!sold!to!a!Foreign!Company,!formally!exported!(without!leaving!
the! country),! rented/leased! to! a! Brazilian! Company! and! reQimported!
through!Temporary!Admission.!!
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!If!the!steps!set!forth!on!the!legislation!are!duly!met,!only!ICMS!will!be!
levied!on!the!transaction!upon!the!Temporary!Admission.!

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•   !Drawback:!!
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!Suspension!of!all!taxes!on!imports!or!local!purchase!(depending!on!the!
State!where!the!seller!is!located,!ICMS!may!be!assessed)!of!inputs!to!be!
used! for! manufacturing! machines,! equipment! etc.! that! are! listed! in! the!
applicable!legislation.!!
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!At!the!end!of!the!manufacturing!process,!the!equipment!shall!be!sold!
to!a!foreign!Company,!formally!exported!(without!leaving!the!country),!
rented/leased! to! a! Brazilian! Company! and! reQimported! through!
Temporary!Admission.!Otherwise,!suspended!taxes!will!be!assessed.!

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Abroad!
Brazil!
Brazilian!Company!
(AfCiliate/Subsidiary!
of!the!Foreign!
Company)!
Services!Provider!
Rendering!of!services!using!!
the!equipment!
Foreign!Company!
(Owner!of!!the!
Equipment)!
Importation!
based!on!a!
rental/leasing!
agreement!
(Temporary!
Admission)!
Concessionaire!
(O&G!explorer/ producer)!

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!
Abroad!
Brazil!
Local!Supplier!
Chartering!Agreements!
Petrobras!BV!
!
Foreign!
Company!
Importation!of!
platforms!and!
vessels!
Petrobras!S.A.!
REPETRO!
Importation!of!
platforms!and!
vessels!
Concessionaire!
(O&G!explorer/ producer)!

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•   ! 0%! withholding! tax! rate! if! the! payment! is! not! made! to! a! tax! haven!
jurisdiction!and!25%!rate!if!made!to!a!tax!haven!jurisdiction!!
•   !No!PIS,!COFINS,!CIDE!and!ISS!(bareboat!charter!and!eventually!time!charter)!
and!suspension!of!taxes!on!the!imports!due!to!Repetro!
•   !Services!are!rendered!locally!in!Brazil!but!the!margins!remain!in!Netherlands!
or!in!other!countries!
•   ! Use! of! Netherlands! as! a! common! residence! of! the! owner! of! the! platform/ vessel,! due! to! the! tax! sparing! clause! of! the! tax! treaty! with! Brazil! (deemed!
withholding!tax!rate!of!20%!on!payments!for!the!use!of!industrial,!commercial!
or!scientiCic!equipment).!!
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•   !Austria!has!also!been!used!as!a!suitable!jurisdiction!due!to!similar!provisions.!

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!Issue!related!to!Petrobras!
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•   ! The! company! was! assessed! two! times! to! pay! withholding! tax! on! the!
importation!of!a!platform!under!a!charter!agreement.!!
•   The!Cirst!decision!was!favorable!in!the!Cirst!and!second!instances!and!will!be!
probably!subject!to!further!examination!by!Superior!Courts!
•   !The!second!decision!was!unfavorable!to!Petrobras!in!the!Cirst!instance!!
•   !The!platform!was!not!deemed!as!an!embarkation!
•   ! In! this! second! case! the! owner! of! the! platform! was! located! in! a! tax! haven!
jurisdiction.!!

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!Issue!related!to!Netherlands!
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•   Recent!amendment!in!the!Dutch!legislation!that!may!impact!the!activities!of!Brazilian!
Oil!&!Gas!companies!that!keep!structures!in!the!Netherlands.!
•   The!amendment!consists!in!the!publication!of!a!new!Decree!that!is!applicable!to!Dutch!
entities!engaged!in!intragroup!leasing,!Cinancing,!rental!or!similar!activities.!
•   According!to!such!rule,!from!January!2014!onwards,!the!entities!incorporated!in!the!
Netherlands!that!intend!to!beneCit!from!any!double!taxation!treaty!(or!European!Union!
Directive)!must!report!annually!on!their!income!tax!returns!whether!they!comply!with!
substance!requirements!–!which!were!already!provided!by!Dutch!legislation.!
•   The!substance!requirements!in!reference!aims!to!ensure!that!the!Dutch!entity!runs!the!
real!risk!of!the!activity!developed!and!that!it!is!effectively!managed!in!the!Netherlands.
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Merchant(Marine(Fund(M(FMM(and(Brazilian(Special(Register(M(REB(
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•   !
Fund! to! provide! resources! for! the! development! of! the! Brazilian! merchant!
marine!and!the!Brazilian!shipbuilding/repairing!industry.!!
•   !Good!conditions!for!loans!contracted!with!the!Brazilian!Development!Bank!
(BNDES)!with!FMM!resources.!
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REB!Q!Tax!Incentives!
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•   ! Created! as! a! voluntary! and! second! registry! registration! for! Brazilian! and!
foreign!(bareboat!chartered)!vessels.!
•   ! Vessels! registered! in! the! REB! enjoy! preferred! treatment! if! compared! to!
ordinary!Brazilian!Clag!vessels:!!
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i.
same! taxation! and! Cinancing! conditions! that! apply! to! vessels! constructed!
for!export!purposes;!!
ii.
access!to!international!insurance!coverage;!
iii.
Suspension! converted! to! zero! percent! rate! of! PIS,! COFINS! and! IPI! for!
Brazilian!shipyards.!

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"   Long(period(without(speciRic(incentives(for(foreign(investors(
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"   Brazilian(taxes(that(are(generally(levied(in(foreign(investment(transactions(
"   IOF!Q!When!a!remittance!is!made!from!Brazil!to!abroad!or!from!abroad!to!
Brazil,!IOF!applies!on!the!exchange!transactions.!The!general!rate!is!0.38%,!
but!several!other!ones!may!be!charged!depending!on!the!transaction.!
"   Withholding!Income!Tax!–!apply!on!remittances!to!abroad!for!the!payment!
of! interests! –! general! rates! of! 15%! or! 25%! (payments! to! beneCiciaries!
located!in!tax!haven!jurisdictions).
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"   Standard(beneRits((
"   Foreign!investors!holding!quotas!of!private!equity!funds!
"   Foreign!investors!trading!with!securities!issued!in!the!capital!markets!!

Law(12,431/2011(
4(forms(of(investment(with(tax(incentives(based(on(infrastructure(projects:(
1.
Bonds!subscribed!by!foreign!investors!(art.!1)!
2.
Debentures! issued! by! SPE’s! to! Cinance! priority! projects! –! issued! until! December!
31,!2015!(art.!2)!
3.
Funds!for!the!acquisition!of!debentures!(art.!3)!
4.
Private!Equity!Funds!for!infrastructure!projects!Q!FIPQIE!(art.!4)!
*!
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If!the!requirements!related!to!the!investments!are!not!met,!the!penalties!
are! only! applicable! to! the! issuers! and! the! holders! still! take! advantage! of! the! tax!
beneCits.!!

!
"   Logistics!
"   Mobility!
"   Energy!
"   Telecommunications!
"   Broadcasting!
"   Sanitation!Projects!
"   Irrigation!
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Each( Ministry( that( is( responsible( for( the( sector( has( to( approve( the( infrastructure(project(

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General((
Securities(
Debentures(
Quotas(of(
Funds(
FIPMIE(
0%!
0%!
0%!
Individuals( Q!
Brazilian(
Legal(Entities(
NonMResidents( not(located(in( tax(haven( jurisdictions(
Q!
0%!
15%!
0%!
15%!
0%!
15%!
!
0%!
!

General(Securities( Debentures( Quotas(of(Funds( FIPMIE(
IOF((
FX(
IOF(
Securities(
IOF((
FX(
IOF(
Securities(
IOF((
FX(
IOF(
Securities(
IOF((
FX(
IOF(
Securities(
Resident(
Individual(
Resident(
Legal(
Entity(
Non(
Resident(
!
Q!
Q!
0%!
Q!
Q!
0%!
!
Q!
Q!
0%!
0%!
0%!
0%!
Q!
Q!
0%!
0%!
0%!
0%!
Q!
Q!
0%!
0%!

DOWNSIDES(
"   Lack!of!liquidity!of!the!Brazilian!market!
"   Uncertainties! about! the! capacity! of! the! Government! to! implement!
infrastructure!projects!
"   Incipient!Secondary!Market!for!this!kind!of!bond!
"   Exchange!risk!

(
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